On the January 1, 20X2, acquisition date, Sheck Company’s book values approximate fair values, except for a building that is undervalued by $60,000. The building has an estimated future life of 20 years. Any additional excess is attributed to goodwill.

Trial balances of the two companies as of December 31, 20X4, are as follows:

During 20X4, Sheck Company sells $200,000 of merchandise to Pepka Company at a price that includes a 20% gross proﬁt. This is their ﬁrst intercompany sale. $50,000 of the goods remains in Pepka’s ending inventory.

Prepare the worksheet necessary to produce the consolidated ﬁnancial statements of Pepka Company and its subsidiary as of December 31, 20X4. Include the determination and distribu- tion of excess and income distribution schedules.

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